Fear of second wave of COVID-19 forces Tourism Industry to take another hit

  • Jun 27, 2020 AEST
  • Team Kalkine
Fear of second wave of COVID-19 forces Tourism Industry to take another hit

Summary

  • The resurgence of coronavirus in Beijing has sent warnings of its second wave across the world.
  • The tourism industry will take more than 2 years or beyond to get back to normal even if the virus is contained in coming months.
  • OECD has estimated 60-80% drop in international tourism economy in 2020.
  • Australia also fears a second wave of COVID-19 after the infection cases surged in Victoria state recently, which tightened restrictions, resulting in ASX listed travel stocks like QAN to plunge by 9.069% and WEB falling by 0.295%, on 26 June.
  • Steps are being taken to lift travel restrictions by instilling confidence amongst travellers and renewing tourism for the future.

Recently, China alerted the countries on second wave of COVID-19 after it reported its highest daily number of new cases in months. The resurgence of infections in Beijing has shaken the country again after it had conquered the virus through strict restrictions on movement. The virus resurgence is a warning bell for the world of a possible second wave, as countries worldwide prepare to reopen their economies.

WHO has reported a record rise in the global novel coronavirus cases on 21 June with a major surge noted in North America and South America regions. The jump in coronavirus cases in the US, Israel, and South Korea intensified market concerns about the difficulty in the growth revival while controlling the spread of COVID-19. Also, South Korea became the first country to announce the second wave of coronavirus. Though the second wave is not expected to be as intense as the first one, and further lockdowns are less likely to be imposed around the world.

Moreover, countries in Europe carry a significant risk of a rise in cases as they are planning to reopen borders after a noticeable drop in virus cases. The border reopening move came as European Commission urged to ease restrictions at the beginning of the summer holiday season giving an insight on the imminent obstacles that can arise.

Tourism Industry

Coronavirus pandemic has crippled the tourism industry due to worldwide shutdown of borders to restrict the spread of the disease. With international aviation at a standstill since March, closure of tourist attraction sites and cancellation of significant events in many countries- the impact of COVID-19 on tourism industry has been quite enormous. Furthermore, tourism forms an essential part of many economies.

OECD estimates that international tourism would witness a 60% decline in 2020 as a result of coronavirus induced shutdown effect and can cause 80% fall if the lockdown measures are extended till December.

There are increasing expectations that recovery in tourism to pre-crisis levels may take more than 2 years. International Air Travel Association (IATA) predicts that airlines would not return to pre-crisis levels before 2021. Worldwide, nations have closed their borders to international tourism. New Zealand and Australia have restricted inbound travel to prevent importing new cases and are exploring the travel bubble between the 2 countries. Apart from that, other countries are also looking to allow travel with neighbouring nations via airbridges between them where the virus has been contained.

Australia tourism gets hit amid COVID-19 second wave fears

Australia is gripped with fears of the second wave of coronavirus after the country’s second-most populous state stiffened controls due to surge in cases. Victoria extended the state of emergency by 4 weeks to 20 July, limiting the number of visitors permitted in homes to 5 and postponed planned rise in the size of gatherings in cafes, restaurants, and pubs.

The news did not bode well for travel and tourism companies. They seem to be hit hard due to second wave fears and thus, can delay the recommencement of domestic travel.

At the time of writing, on 26 June, coronavirus in Australia had infected 7,595 people and taken the lives of 104 people. In the last few months, the country managed to limit the cases through a combination of measures like closing borders, pursuing social distancing, quarantining returning residents from overseas in hotels, as well as increasing its testing and tracing capability.

ALSO READ: Virus Mutation, Second Wave of Infection and Latest Vaccine Developments

The current surge in cases has prompted the government to bring back some severe restrictions. The Australian Health Protection Principal Committee comprising state chief health officers and Brendan Murphy, Australia’s Chief Medical Officer have advised against travel to and from 6 local government areas in Victoria recognised as hotspots for mushrooming fresh cases until community transmission is controlled in those areas.

The benchmark S&P/ASX200 index ended the day’s session, a bit higher by 1.49% at 5904.1 points, on 26 June, after it fell 148 points closing at 5817.7 on the previous day post virus cases were reported in Victoria.

Travel stocks took a beating with ASX listed airlines and travel agents being the worst performers amid growing concerns about a second wave. The shares of Qantas Airways Limited (ASX:QAN) slid 9.069% and Flight Centre Travel Group Limited (ASX:FLT) slid 1.222% on 26 June, while Webjet Limited (ASX:WEB) shares fell 0.295%.

Brendan Murphy expressed his concerns about a swift rise in the number of cases over last few days in Victoria, which appeared to be caused by family gatherings while in some instances, people who tested positive or who came in contact with the infected person failed to self-quarantine.

Scott Morrison, PM of Australia, stated that such a scenario has now become part of living with COVID-19. He added that the government would persist with the opening up of economy and getting people back to work.

Australia is developing its long-term tourism strategy - Tourism 2030 with a focus on the industry’s resilience.

Steps being taken to revive the industry

Governments have taken up massive stimulus packages that have benefitted tourism sector. Further, governments are focusing their efforts on:

  • Relaxing travel limitations and working with businesses to access liquidity support and apply new health protocols to travel safely
  • Rebuilding travellers’ confidence and increasing demand with new safety labels for the sector, information apps for the visitors and other measures
  • Restructuring of the industry by rebuilding destinations, promoting innovation and investment

 

Additional measures need to be taken to lift the travel and tourism sector due to the interdependent nature of the industry. Travel and tourism industry, as well as governments, must continue to reinforce their coordinated approach to complement businesses and workers.  

Global tourism is expected to be hard hit in 2020, and beyond even after the virus is contained because when tourism businesses would reopen, it will be following completely new procedures until a vaccine is made. Further, COVID-19 is likely to infuse a behavioural change among tourists, which will also affect the tourism industry.

 


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